Synergy is an often used and under defined term to justify mergers between enterprises. Synergy generally refers to the savings achieved when two or more separate enterprises are combined to create one enterprise. For example, enterprise A and enterprise B each use similar billing systems to bill their customers. Each billing system costs $1 million a year to maintain for a combined total of $2 million a year spent by enterprises A and B on their billing systems. The merger of enterprise A and enterprise B may be justified in part through a unified billing system which may cost a predicted $1.5 million a year to maintain. In this example a predicted synergy of $0.5 million dollars a year is gained through the merger of enterprises A and B.
While the predicted synergy of two or more enterprises is a main reason behind the merger of enterprises it is not tracked within an enterprise or reported in any standardized way to the public or investors, such as through a provision in the Sarbanes-Oxley Act of 2002. Thus there is no way to ensure that the predicted synergy is actually occurring. This is further exacerbated because current financial systems are designed to track money that is spent and are not designed to track money that is saved.